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Opel Vauxhall Goes Backwards, But Overall Trend Looks Good

Neumann Low-Cost Car Comment Raises Eyebrows.

While Ford Europe at least made miniscule profits in the second quarter, General Motors’ European Opel and Vauxhall subsidiaries slipped into reverse.

GM Europe lost $305 million in the second quarter, up from a loss of $114 million in the same period last year, with company officials blaming costs relating to the closure of an assembly plant in Bochum, Germany.

Opel is the mainly German-based company which sells across Europe except Britain, which Vauxhall serves with identical cars.

Opel-Vauxhall lost $844 million in 2013, down from $1.94 billion in 2012, and has accumulated red ink totaling around $18 billion since 1999.

GM Europe president Karl-Thomas Neumann has said Opel-Vauxhall will break even by 2016, raise European market share to eight per cent by 2022 from 5.8 per cent in 2013, and raise profits on an EBIT (earnings before interest and tax) basis to five per cent by 2022.

International Strategy and Investment seemed quite sanguine about the result, saying Opel-Vauxhall continues to benefit from restructuring and sees market share gains in 11 European markets.

Morgan Stanley looked past these numbers and said break-even might be reached sooner than Neumann’s target. But it did say Opel-Vauxhall consumes roughly $1 billion of cash per year and is a big strain on management and engineering resources.

Meanwhile analysts were puzzled by a recent Neumann remark saying he would like to develop a line of low-cost models along the lines of Renault’s Dacia to slip in underneath the Opel and Vauxhall brands. Opel-Vauxhall decided to remove the cheaper Chevrolet brand from Europe, because its mainly Korean made vehicles were cannibalizing Opel-Vauxhalls. Chevrolets were perceived as being just as good as Opels and Vauxhalls for much less money. Presumably, any new low cost car would be seriously cheaper than current Opels and Vauxhalls to avoid repeating the Chevrolet mistake.

Unsophisticated, stripped down

Opel Vauxhall wouldn’t be alone in trying to emulate Dacia, Renault’s cut price subsidiary which makes unsophisticated stripped down cars for sale in the third world. When European consumers got to hear about cheap and cheerful Dacias, demand was too strong for Renault to resist.

Ferdinand Dudenhoeffer, director of the Center for Automotive Research (CAR) at the University of Duisburg-Essen, said the Dacia idea was the most important story in the business for 10 years, and everyone wants to join in. Even VW is thinking about it, he said.

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